Exclusive: U.S. standards council to investigate New Oriental after Reuters report

MIAMI (Reuters) - A U.S. standards-setting body said it would investigate New Oriental Education & Technology Group Inc (EDU.N) in the wake of a Reuters report that detailed allegations of academic fraud at the company.

The American International Recruitment Council, which certifies agencies that recruit foreign students on behalf of U.S. colleges, will investigate the company in response to the report, said Jeet Joshee, AIRC’s president-elect.

“It’s concerning, highly concerning,” he said of the allegations in the report.

Shares of New Oriental plunged after Reuters reported the council’s plan to open a probe. The drop in the stock, as much as 24 percent at one point on Friday afternoon, erased more than $1.8 billion from the company's stock market value at its lowest point. It closed the day down 14 percent at $42.00.

AIRC is a non-profit membership organization comprised of 289 colleges and universities and 78 agencies that refer foreign students to U.S. schools often for a commission. It establishes best practices for international student recruitment and certifies agencies in a process that includes inspections.

Joshee said AIRC certified New Oriental’s counseling division -– Beijing New Oriental Vision Overseas Consultancy Co -- about three or four years ago. He said AIRC could revoke the certification if the fraud accusations are confirmed.

Reuters reported today that eight former and current New Oriental employees had told the news agency that the Beijing-based company had helped to write college application essays and teacher recommendations, and had falsified a high school transcript.

A New Oriental student contract reviewed by Reuters stated that its services included “writing or polishing” parts of applications. The contract also said New Oriental would set up an email account on behalf of the client for communicating with colleges, keeping sole control of the password. Several former employees said some students never even saw their applications.

“It’s most concerning that they would actually handle the whole application for a student,” said Joshee, who chairs AIRC’s certification body. Joshee also serves as associate vice president for international education at California State University, Long Beach.

New Oriental denies condoning or wittingly engaging in application fraud. The publicly listed company, with annual revenue of $1.5 billion, is China’s largest provider of private education services.

In addition to offering college counseling services to thousands of Chinese students seeking to study in the United States, New Oriental has contracts with colleges including Arizona State University, the University of Cincinnati and Temple University. Those colleges pay New Oriental commissions when it refers students who enroll.

Two New Oriental employees at AIRC’s annual convention in Miami told Reuters the company had “relationships” with about 100 U.S. colleges and universities. They declined to say how many of those schools pay commissions to New Oriental.

Joshee said his school - California State, Long Beach - signed a contract this year with New Oriental, although it has not provided any students to date. He said the university normally pays agents $1,500 to $2,000 for each student who enrolls. The university would await the results of AIRC’s probe before taking any action, he said.